How Democratic Decline Paved the Way for Neoliberalism

The neoliberal turn by centre-left parties wasn't just a cynical betrayal or an economic necessity – it came after decades in which they grew increasingly distant from the people they aimed to represent.

To understand the crisis of social democracy, we need to understand the changing relationship between party and society during the 1970s.

In the early 1970s, left and centre-left parties campaigned on platforms far more radical than those of decades before. With the Meidner Plan, Eurocommunism, the Programme Commun, and Tony Benn’s Alternative Economic Strategy, the period opened the path for a political vision which transcended the Keynesian demand management of the postwar period.

Yet by the next decade, these same parties had taken a sharp turn in the opposite direction. Across western Europe, socialist and social democratic parties joined the likes of Paul Volcker and Margaret Thatcher in hiking interest rates, deregulating finance, weakening trade unions, and cutting welfare provisions. What led centre-left governments to abandon their transformative principles, and was there a viable alternative?

Leftist treatments of the neoliberal turn tend to follow two distinct lines. The first is a narrative of betrayal. Emphasising the position of party leaders as agents of capital, this view holds that it was cynical politicking by individual decision-makers which led them to abandon the socialist cause. The second is a deterministic narrative of economic necessity. In this account, the uprisings of the 1960s and ’70s gave way to a fundamental recomposition of capital which globalised and decentralised production, financialised the economy, and in doing so, weakened the class identities and organisation of workers.

But neither the narrative of betrayal nor the narrative of economic necessity adequately capture the causes of the Left’s neoliberal turn, nor the alternative paths which could have been pursued. As political scientist Adam Przeworski noted in his 1985 book,

‘The very possibility of committing mistakes presupposes simultaneously a political project, some choice among strategies, and objective conditions that are independent with regard to the particular movement. If the strategy of a party is determined by economic circumstances, then the notion of mistakes is meaningless: the party can only pursue the inevitable. […] The notion of mistakes is also rendered meaningless within the context of a radically voluntaristic understanding of historical possibilities. If everything is always possible, then only motives can explain the course of history.’

The new book Market Economy, Market Society revisits fundamental questions on the neoliberal shift through interviews with policymakers, trade unionists, and activists who lived through this crucial political moment. Beyond betrayal and necessity, the volume’s compiled accounts situate the decline of European social democracy at the juncture of politics and society — in the structure of political parties, and their relationship to popular mobilisation.

In his interview, former Italian Communist Party leader Claudio Petruccioli notes that ‘the problem was one of creative destruction; Capital reconstituted itself, we did not.’ Faced with a rapidly escalating economic crisis, communist and socialist party leaders struggled to reformulate a political language that accurately represented the experience of the public.

Among the primary challenges in this formulation was the commitment to party unity. Ravaged by internal debates, leftist parties prioritised the preservation of a unified party line over reconstitution and adaptation. As former Spanish Prime Minister Felipe Gonzalez reflects, ‘[social democracy] died because it couldn’t understand that the society it had helped create was not the society which had existed when it started.’

Underlying the struggle to form a novel political vision was a crisis of organisation. Asked about the failure to resist Mitterrand’s 1983 shift, French senate member Anicet le Pors observes that ‘at no time were workers called upon to mobilise in support of social transformation.’ Technical advisor Francois Morin similarly argues that the aftermath of the nationalisation programme ‘muted and numbed social movements’ and ‘trade unions ceased to be agents of political change’.

By the end of the 1970s, communists and socialists did not just fail to expand their reach into new sections of the working class. Within their existing base, they abandoned a conception of the party as a living feature of public life, shifting their efforts towards negotiating a seat at the governing table.

The question of transformative rhetoric and political organisation are inherently linked: weakening party structures at the level of everyday life meant that the party could no longer act as a vehicle for the organic development of a radical vision. On the Italian experience, the late Sicilian trade unionist Emaniele Macaluso concludes: ‘Any party which disassociates itself from the public will dissolve into obscurity. Conversely, every popular movement needs an organisation which will politicise social unrest.’

The disintegration of popular participation in party politics is important because, in many cases, major economic transformations are not the result of a coherent and preconceived set of economic ideas, but a series of micro-level efforts to maintain political power. As former Italian Prime Minister Giuliano Amato recognises, ‘At the time, we could not understand the consequences of what we were doing. We could not see the moment in which the loss became greater than the benefits.’

Far from grappling with the big economic questions, in their day-to-day lives, political actors are largely focused on minor calculations that will strengthen their strategic position. Individually and over time, however, these minor calculations have the potential to fundamentally reshape political coalitions and structures of power.

It is by shaping the costs and benefits of these minor calculations that alternatives can be forged. The experience of the 1970s demonstrates the need for building political institutions at the level of everyday life, which are capable of facilitating the development of a vision reflective of the  experiences of a diverse and changing working class, and mobilising it in a manner that actively constrains the decisions of those in power.

It is at the intersection between the political power of the party, with all the constraints it faces, and the social base which underpins it, that a progressive socialist strategy can be formed. As le Pors contends: ‘It is only through major upheavals that we can generate new situations. Not through continuity, but through rupture. In the words of Goethe, the goal is the path.’